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Solo 401k FAQ – Can I transfer funds from my Pre-Tax Solo 401k to a Roth IRA at any time?
QUESTION:
Are conversions from a pretax Solo 401(k) account to a Roth IRA allowable for individuals under 59.5 years of age?
RESPONSE:
Good question!
Under the solo 401(k) distribution rules, one is generally limited to being able to transfer money out of the solo 401(k) until one is at least 59.5 years of age.
There are certain limited exceptions to this general rule:
- Funds that were rolled into the plan from a former employer may be rolled out of the Solo 401k at any time;
- Employer Solo 401k contributions may also be rolled out of the Solo 401k at any time provided that (i) such employer contributions have been accumulated in the Solo 401k plan for at least 2 years, or (ii) the participant has participated in the Solo 401k plan for at least 5 years.
As such, if the Solo 401k owner/participant is under 59.5 years of age, he or she could only transfer funds out of the Solo 401k to a Roth IRA if the funds met one of such certain limited exceptions.
If you meet the requirements to process the conversion of pretax solo 401k funds to the Roth IRA, please let us know so that we can assist with the logistics and the required Form 1099-R reporting.
